BOJ Beat: Minutes Show Split Among Policy Board

Skepticism is growing among the Bank of Japan 's policy board over its ambitious inflation target, with some members openly disagreeing with Gov. Haruhiko Kuroda’s optimism that the economy is heading in its intended direction.

Bloomberg News

Is space building between the views of the Bank of Japan’s policy board members?

The minutes of the BOJ’s Oct. 31 policy board meeting, released Tuesday, revealed a clear split among the board members. While it wasn’t large enough to alter policy, it could widen from April next year when the economy is expected to slow down following a rise in the sales tax.

The dissent itself was already known. At a news conference following the Oct. 31 meeting, Mr. Kuroda had revealed that three members–Sayuri Shirai, Takehiro Sato and Takahide Kiuchi–opposed some of the wording of a semiannual outlook report on prices and growth that the board had voted on.

While the report was endorsed by a majority of the nine-member board, Mr. Kuroda had said the three had dissented to the report’s prediction that on-year rises in the consumer price index would likely average around 2% sometime by the end of March 2016.

Tuesday’s minutes offered more details of the argument by the skeptics.

Ms. Shirai said there was strong uncertainty over how the general public will form mid-and long-term inflation expectations. While most members endorsed the report’s expression that Japan’s economy has been following a path toward attaining the 2% inflation target “as expected,” she proposed changing the phrase “as expected” to “at a moderate pace.”

Also citing the high degree of uncertainty over foreign economies as well as jobs and income conditions at home, the former academic proposed adding the phrase that “attention should be paid to the downside risks.”

Ms. Shirai, who dissented at the meeting for the first time since Mr. Kuroda took the bank’s helm in March, is expected to explain further details about her position on Wednesday when she speaks at a gathering with business leaders in Tokushima, western Japan.

Mr. Sato and Mr. Kiuchi proposed to change the report to say that the 2% target will “come into sight” during its projection period from “price increases are likely to reach the 2% target.”

Referring to risks to the economy that most members have said are balanced, Mr. Sato argued that the report should say they are “somewhat tilted to the downside.”

Mr. Kiuchi suggested eliminating the numerical target and so the report simply says that prices are “likely to rise moderately.”

Mr. Kiuchi has expressed chronic opposition to the 2% target and has constantly proposed making it more flexible at policy board meetings since its adoption.

All of the proposals made at the meeting were voted down and the board agreed to maintain the bank’s unprecedented monetary policy launched in April. But it could be a sign of growing cracks in the board’s near-unanimous stance ahead of an increase in the sales tax next April.

Many private economists expect the BOJ to take additional steps sometime between March and July.

Mr. Kuroda admitted on Monday that the 2% inflation target is “very ambitious,” but said that prices could reach around 2% in the spring of 2015.

About Real Time Economics

Real Time Economics offers exclusive news, analysis and commentary on the U.S. and global economy, central bank policy and economics. Send news items, comments and questions to the editors and reporters below or email realtimeeconomics@wsj.com.